Employees who now have a net salary of over 800 euros, as well as those who have a secondary education and have a salary of 600 to 800 euros, will have lower coefficients for calculating the future pension, it follows from the law proposed by the Government from the "Europe Now 2" Program and what it is written in the current Law on Pension and Disability Insurance.
"The amount of the future pension for each employee mostly depends on his personal insured ratio, which is obtained by dividing the amount of his gross salary in that year by the average gross salary in the country. If his gross salary remains the same and the national average gross salary increases, he will have a lower pension calculation coefficient and thus a lower pension amount in the future," a source from the Pension and Disability Insurance Fund told "Vijesta", stating that this was clearly stated in Article 22 of the Law on PIO.
The Government's plan is to reduce the amount of contributions for PIO from 20,5 to 10 percent, of which the employee's burden is reduced from 15 to 10 percent, and to abolish the part of the employer's contribution of 5,5 percent, as well as to increase the minimum net salary for high school students and those with a lower vocational education from 450 to 600 euros and those with a higher education from 450 to 800 euros. According to the legal definition, gross earnings include net earnings and all contributions and taxes borne by the employee, but not duties borne by the employer.
With these proposals, the amount of gross salary will remain the same for employees who now have a net salary of over 800 euros, as well as those who have a secondary vocational education, or who work in that position, now have a net salary of 600 to 800 euros. For those categories of employees, the increase in minimum wages will not affect, but only a part of the pension contribution will become part of the net salary, and the gross salary will remain the same.
However, due to the increase in minimum wages, there will be an increase in the average gross wages, so these two groups of employees, when calculating the personal coefficient of the insured, i.e. dividing their gross wages, which remains the same, with the new higher amount of the average gross wages, will receive a lower coefficient, which is crucial for calculating the future pensions.
"On the current average net salary of 830 euros, the gross salary is 1.017 euros, which means that the employee's annual personal coefficient for that year would be 1 because it is equal to the average gross salary. Through "Europa Sad 2", their net earnings increase to 880 euros, because five percent of the contribution to PIO is converted into net earnings, but the gross earnings remain the same at 1.017 euros. According to the government's proposal, it is estimated that the average gross salary in Montenegro, after the increase in minimum wages, will now be 1.180 euros, instead of the previous 1.017 euros. So that when the average salary of those employees of 1.017 is divided by the future average of 1.180, they get a personal coefficient of 0,86, which is 14 percent lower than the current coefficient of 1", said the interlocutor of "Vijesti" from the PIO Fund.
The personal coefficient is then multiplied by the pension length of service, thus obtaining personal insurance points, which are again multiplied by the value of the pension by one personal point on the day of exercising the right, and the final amount of pensions is obtained. However, if the personal coefficient is reduced, as is happening now, the final future pension amount is also reduced.
"So, in the future and in the long run, these insured persons will have a negative effect, because in the following years their annual personal coefficient (for 2025, '26, '27...) will be lower compared to this and previous years, because a real discrepancy in the relationship between their gross salary and the average at the level of Montenegro. "Employees whose earnings will increase due to the increase in minimum wages to 600 and 800 euros will see their annual personal coefficient increase, unlike these others whose earnings will not be increased by the same percentage", said the interlocutor of "Vijesti" from the PIO Fund.
Milatović on reducing the coefficient, the Government and PES drew attention
The President of the State, Jakov Milatović, first warned yesterday that the proposed redistribution of pension contributions, according to the current calculation system, will reduce the value of the annual personal coefficient for the largest number of employees in Montenegro.
He said that one of the elements that crucially determines the amount of someone's pension is the annual personal coefficient, which represents the ratio of the insured's gross earnings to the average gross earnings.
In a post on Iks, he asked why the Government is proposing to reduce pensions for future retirees.
"It clearly follows from the above that future pensions for the largest number of currently employed citizens will be smaller. I expect an official clarification of the mentioned reduction of pensions from the Government of Montenegro", he added.
"The system of intergenerational solidarity represents one of the most sensitive and complex economic and social mechanisms. Any change in this system, especially if it is not well thought out, can lead to unfathomable consequences for future pensioners", said Milatović.
The Government then responded that "the amount of the contribution does not determine the amount of the pension, and therefore it is clear that the reduction of pensions cannot occur in the following period".
However, Milatović did not mention the "amount of contributions" but rather the deterioration of the ratio of gross earnings to average gross earnings for a significant part of employees.
Pokret Evropa also announced that the President of Montenegro, Jakov Milatović, "showed ignorance or is not telling the truth about pensions", but they did not deny what he said.
Milatović then said that, "according to the established manner, he asks one thing, and the government answers another".
He also published an example of calculating the personal coefficient on the current and future amount of gross earnings, which show its reduction.
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